On the Twentieth Anniversary of Tiananmen: It's Still the Economy, Stupid!

07/05/2009 05:12 am ET | Updated May 25, 2011

For China and the world, June 4th, the twentieth anniversary of the Tiananmen crackdown, is a time for reflection. One important question emerges from the narrative of this reflection: after 20 years, how could a protest of such magnitude and repression of such brutality have resulted neither in significant advances in democracy nor further Tiananmen-style protest? The sometimes-overlooked answer is that the impetus of the protest was more economic than is commonly realized. The fact that Tiananmen has yet to have a sequel can be explained largely by the economic success of the regime since '89.

After a decade of successful economic reforms, in 1988 a combination of price liberalizations and an overheating economy resulted in an escalating cycle of panic buying, price rises and inflation. With inflation reaching as high as 80%, the hardliners in the Chinese government battened down the hatches and implemented an austerity program. This entailed the retraction of many newly granted economic freedoms and a growth rate that slowed "from 11% in 1988 to 4 % in 1989." Although initially painful, the program eventually achieved its goal of curbing inflation. Economic liberalization and double-digit growth rates returned to China with a vengeance in the early 90s.

The students who formed the nucleus of the protest were upset both by the inflation and by the state's solution to it, but for them the lost economic opportunities were particularly painful. Students at top Chinese universities were poised to achieve things that would have been impossible for their parents. As near-certain big winners from economic liberalizations, these students had more to lose from the rolling back of economic reforms and the slowing of growth than almost any other group.

Many aspects of the protest hinted at its economic inspiration. It was no coincidence that the demonstration erupted at the most dire economic juncture: after the austerity program had restricted economic freedoms and slowed growth, but before inflation had been brought under control. Interviews with those who were students in 1989 show that the flavor of the month on Beijing campuses had not been democratic theory, but Hayek's classic criticism of planned economies, The Road to Serfdom. Even Hu Yaobang, whose death on April 15th prompted the first students to march to Tiananmen, was more a pragmatic economic reformer than a democratic crusader. Students, and the workers and peasants who joined them, certainly wanted political reforms, but this demand was in large part prompted by their call for economic reforms.

The force of the government's crackdown may be sufficient explanation for the lack of further large-scale protests in response to June 4th, but it fails to explain the twenty years of relative peace and stability that followed. And, as many reports on this anniversary will doubtlessly bemoan, few of the political demands have been met. What explains the conspicuous absence of an event with anything like the magnitude or scope of Tiananmen is the unparalleled economic success of China since the early 90s. Although their political demands have not yet been met, the economic complaints of Tiananmen protesters have been addressed in the form of consistent economic growth, relatively low inflation and measured economic liberalization. Just a few years after students were killed in the streets around Tiananmen Square, their more fortunate peers were offered jobs with the world's top companies, received bonuses larger than their parents' annual salaries and were given opportunities to travel overseas.

There have, of course, been protests since 1989. In fact, the Chinese government records tens of thousands of "mass incidents" every year. These protesters, however, usually come from the ranks of those who have fared poorly as a result of economic reforms and they tend to call for remuneration of specific grievances rather than wholesale political reform. Most commonly they fall into two groups: farmers whose land has been taken with little or no compensation and workers whose salaries, pensions or unemployment benefits have not been paid. This does not mean that their grievances are unimportant or that they pose no threat to the Chinese state, but it does demonstrate the economic motivations behind protest in modern China.

I do not intend to suggest that a call for significant democratic reforms was not an important force behind the June 4th movement (as it is known in China). However, in this case -- as it so often occurs throughout history -- people's outrage at their government's economic mismanagement led them to demand political change in addition to economic reform. Indeed, it was an economic concern, the levying of taxes, that helped spark the American Revolution.

In short, when the economy tanked in 1989 students, eventually joined by workers and peasants, demanded a greater say in the state's decision making. Initially the state used force to quell the protest, but then quickly returned China to a path of economic liberalization and dramatic growth. Since that time China's leaders have managed to sail a remarkably smooth economic course, but should growth slacken as it did in 1989, it is more than likely that the Chinese people, especially students, will again question their leaders and demand a greater voice. With university graduates encountering greater difficulty finding jobs this is a possibility that is sure to be on the mind of China's leaders.